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The summer of copyright and music licensing part 1 – songwriters demand a bigger share

This is the summer of copyright – as seemingly every government agency with any connection to media issues is looking at music licensing and other copyright issues. Much press was given to the House Judiciary Committee hearing held last week. But the Congressional committee’s consideration of copyright issues is but one of the many places where issues of importance to broadcasters and digital media companies are being reviewed. The Copyright Office is doing its own review of the music royalty landscape (see our articles here and here), and I had the privilege of participating in their first roundtable discussion of these issues in Nashville the week before last. Also holding hearings on copyright issues is the Commerce Department in connection with their Green Paper, which we summarized here and here. The Copyright Royalty Board is starting its consideration of the recordkeeping requirements for webcasters and other digital music users (here and here), and also has begun the proceeding to determine the rates to be paid by webcasters for the public performance of sound recordings for the period of 2016-2020 (here and here). And there is proposed legislation on pre-1972 sound recordings (the RESPECT Act), songwriters’ royalties (the Songwriters Equity Act) and another bill proposing to limit the collection of retransmission consent fees by TV companies that also own radio stations and don’t pay performance royalties to musicians. On top of all that, law suits are pending in various courts on these and related issues, and the Department of Justice just announced a proceeding to review the consent decrees governing ASCAP and BMI that have been in place for over 50 years. I could easily cover nothing but music issues on this blog, and still not have enough time to write about all the pending proceedings, much less any new ones that may arise as I’m trying to catch up on all that has gone before. But let’s start with one of the fundamental issues driving a significant part of this review.

Perhaps surprisingly, one of the principal drivers of much of this review of the Copyright laws is not whether there should be a performance royalty for sound recordings paid by broadcasters to record companies and performers for music played over the air, or even issues about the amount of royalties paid to recording artists and labels in the digital world – though much of the trade press (particularly the broadcast trade press) seems to focus on these issues, and to present them as the drivers of all of these reform proposals. Certainly these issues are alive and important – but the area where there seems to be the most passion, and the strongest lobbying effort for copyright reform of music licensing deals not with performers and labels, but instead with the amounts that songwriters get paid for their use of music – with the debate focusing on how much they get paid by digital services for music streaming, and by the record labels for making “reproductions” of their compositions.

The royalties paid to songwriters have, traditionally, not been particularly high profile. The public performance royalties paid to songwriters (and to the publishing companies that are usually assigned the copyrights to the compositions) are usually paid to the Performing Rights Organizations – ASCAP, BMI and SESAC. Once in a while there are disputes over the amount of the royalties that they will receive from music users, but as ASCAP and BMI are overseen by antitrust consent decrees, and the rates established, when they can’t be negotiated between the PROs and the users, by a rate court in the US District Court in the Southern District of NY, these disputes have not led to dramatic changes in the amounts that are paid for these rights. Broadcasters did pay more for one royalty period when the rate–setting standard moved from a percentage of revenue to a fixed fee, but recent decisions have brought those rates back in line with historic norms (see our articles here and here). And digital services pay amounts that are roughly comparable – though somewhat higher as a service gets more interactive.

But, as we wrote back in April, the songwriters have been looking at the amounts that the recording artists and labels have been able to obtain for royalties from digital music services through Copyright Royalty Board litigation, and have become envious. At the Copyright Office Roundtable, and at last week’s Judiciary Committee hearing, the songwriters were complaining about how, in the digital world, the royalties paid to the performers and labels can be more than 10 times what is paid to songwriters. They argue that this isn’t fair. The recording artist representatives, through the RIAA and others, have contended that the song only gets its value when it is recorded and thus their higher share of royalties is justified. But the songwriters counter that, in the one place that their songs are not subject to government oversight – the market for synch rights where movie, video or commercial producers pay for the rights to include music in their productions – the publishers and the labels each get an equal share of the payment for music, nothing like the one-sided splits in favor of the performance royalties that is seen in the digital world.

So songwriters are asking for reform in this system – leading to the introduction in the Songwriters Equity Act and the DOJ action proposing to look at whether reforms in the antitrust consent decrees governing ASCAP and BMI should be made. We’ll write about these issues in subsequent posts, but the real issue for copyright users – like broadcasters and digital music services like webcasters – is where any increase in the amount that songwriters are paid will come from. Already services are staining under the music royalty burdens – so any noticeable increases in these burdens are likely to push some services out of business – or at least out of the music business. In recent days, the trade press has been full of stories about services reacting to the Judiciary hearing on Tuesday by suggesting that they will limit their uses of music. And if there is less music used, there may well be lesser royalties collected – even if the per unit royalty is raised.

Several music services and industry observers have suggested that services pay one royalty for music – and let the artists, songwriters, publishers and labels decide among themselves how to divide up that royalty. Even the RIAA has advanced a similar proposal in their comments in the Copyright Office proceeding. There are obviously many issues with such a proposal including issues of how much any royalty would be, who would administer it, and how any distribution would be decided. Many issues, but with content owners clamoring for more royalties from services that are already straining under the royalty burden – something’s got to give!